ON Stock: At the Point of Acceleration
The Nasdaq index is on a complete tear, forging new all-time highs on daily basis. I’m not sure if people understand the magnitude of what is going on, but the tech sector is in a fever pitch and it is wise to act accordingly. The semiconductor space has led much of the rally in this index, and it is why I am returning to ON Semiconductor stock to provide an update.
I first expressed my bullish views on ON Semiconductor Corp (NASDAQ:ON) in September 2016, with a publication titled “ON Semiconductor Corp: If ON Stock Does This, it Will Explode.” In that report, I outlined a very large technical pattern that was in development. Since that report, that technical pattern has been resolved, and recent developments are now suggesting that the ON Semiconductor stock price is ready to accelerate higher.
To quickly clarify, my views on this investment are generated using technical analysis. This method of investment analysis is predicated on my ability to successfully decipher price patterns and indicators on a price chart in order to generate a bullish or bearish view on an investment. I have devoted nearly two decades strengthening my understating of this method of analysis, and I believe that I have reached a leave of proficiency that is now directly attributed to the successes I am witnessing in my investment strategies.
The following ON Semiconductor stock chart illustrates the set of circumstances that support a bullish view on this investment.
Chart courtesy of StockCharts.com
There are two distinct reasons on the price chart above that justify holding a bullish view on ON stock.
This first reason stems from a very powerful price pattern, which I have highlighted on the chart above. This ascending triangle has been in development for nearly two decades, which is just as long as my investment career. Triangle patterns like this one are created using two converging trend lines. These trend lines are used to define levels of support and resistance. Triangle patterns in general are very powerful price patterns, and this is due to this pattern’s ability to generate and store momentum within it.
Momentum is created and stored as the pattern progresses because these levels of support and resistance are being defended by their respective bullish and bearish camps. Triangle patterns are where the bulls and bears fight for dominance, and the battle is won when price exits the pattern. This exit occurs as the stock price either breaks above resistance or below support. Once a winner is declared, the share price is free to trend in that direction. The move out of the triangle pattern is magnified as the losing side unwinds their position, accepting their defeat.
In March 2017, ON Semiconductor stock exited the triangle pattern in an upward direction, suggesting that higher prices were likely to follow. The size of this pattern is serving to suggest that an extremely powerful rally is now on the horizon.
The second reason supporting a bullish view stems from the moving average convergence/divergence (MACD) indicator highlighted in the lower panel. MACD is a trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
A bullish cross was generated in August 2016, which is serving to suggest that bullish momentum is now governing the predominant direction ON stock is trading in. This bullish cross creates a dynamic where the path of least resistance for the stock price is tilted towards higher prices. This indicator is still in bullish alignment, which supports the notion of higher prices suggested by the completed ascending triangle.
The following ON semiconductor stock chart illustrates the most recent developments that support the view that the stock price is now set to accelerate.
Chart courtesy of StockCharts.com
The price chart above illustrates constructive price action. Constructive price action is a necessary ingredient in a sustainable trend, and it consists of a two-wave structure. This two-wave structure contains an impulse wave and a consolidation wave. The impulse wave serves to advance price, while the consolation wave unwinds overbought conditions and sets up the next advancing impulse wave.
ON stock has just exited the consolidation wave in an upward direction, suggesting that a new impulse wave is now in development. This would mark the first developing impulse wave since the price exited the ascending triangle. If my analysis is correct, then ON Semiconductor stock is now on a course of price acceleration that will begin with this impulse wave.
The MACD indicator in the lower panel has just generated a bullish cross on the daily scale, which just adds credence to the notion that a new impulse wave is now in development. If the stock price is set to accelerate, it will happen now.
Bottom Line for ON Semiconductor Stock
I am bullish on ON Semiconductor stock because there numerous technical indicators that support this view, but none are as compelling as the completed ascending triangle. Constructive price action on the price chart is now suggesting that the ON stock price is set to accelerate, so if my analysis has any merit, an epic run-up in the stock price is now set to commence.